Equity Method Investments



As of	May 30, 2013				August 30, 2012
	Investment Balance		Ownership Percentage		Investment Balance		Ownership Percentage
Inotera	$	259	35.5	%	$	370	39.7	%
Other	13		Various		19		Various
	$	272			$	389

We recognize our share of earnings or losses from these entities under the equity method, generally on a two-month lag. Equity in net loss of equity method investees, net of tax, included the following:



	Quarter Ended						Nine Months Ended
	May 30, 2013			May 31, 2012			May 30, 2013			May 31, 2012
Inotera	$	(13	)	$	(38	)	$	(121	)	$	(157	)
Other	3			(77		)	1			(105		)
	$	(10	)	$	(115	)	$	(120	)	$	(262	)

As of May 30, 2013, our maximum exposure to loss from our involvement with our equity method investments that were VIEs was $262 million and primarily included our Inotera investment balance. We may also incur losses in connection with our rights and obligations to purchase substantially all of Inotera's wafer production capacity under a supply agreement with Inotera.

Inotera

We have partnered with Nanya in Inotera, a Taiwanese DRAM memory company, since the first quarter of 2009. As of May 30, 2013, we held a 35.5% ownership interest in Inotera, Nanya held a 36.1% ownership interest and the remaining ownership interest was publicly held. On May 28, 2013, Inotera issued 634 million common shares to Nanya and certain of its affiliates in a private placement at a price equal to 9.47 New Taiwan dollars per common share (approximately $0.32 U.S. dollars as of May 28, 2013), which was in excess of our carrying value per share. As a result of the issuance, our ownership interest decreased from 39.7% to 35.5% and we expect to recognize a gain of approximately $48 million in the fourth quarter of 2013. In March 2012, we contributed $170 million to Inotera, which increased our ownership interest from 29.7% to 39.7%.

As of May 30, 2013, based on the closing trading price of Inotera's shares, the market value of our equity interest in Inotera was $854 million. As of May 30, 2013 and August 30, 2012, there were gains of $51 million and $49 million, respectively, in accumulated other comprehensive income (loss) for cumulative translation adjustments from our equity investment in Inotera.

The net carrying value of our initial and subsequent investments was less than our proportionate share of Inotera's equity at the time of each of those investments. These aggregate differences are being amortized as a net credit to earnings through equity in net loss of equity method investees (the "Inotera Amortization"). For the third quarter and first nine months of 2012, we recognized $12 million and $36 million, respectively, of Inotera Amortization. As of August 30, 2012, the remaining amount of unrecognized Inotera Amortization was not significant.

Inotera incurred net losses of $24 million for its first quarter ended March 31, 2013. Also, Inotera's current liabilities exceeded its current assets by $1.68 billion as of March 31, 2013, which exposes Inotera to liquidity risk. As of December 31, 2012, Inotera was not in compliance with certain loan covenants and had not been in compliance for the past several years. Inotera received a waiver from complying with the December 31, 2012 financial covenants. Inotera's management has developed plans to improve its liquidity, but there can be no assurance that Inotera will be successful in improving its liquidity, which may result in its lenders requiring repayment of such loans during the next year.

On January 17, 2013, we entered into agreements with Nanya and Inotera to amend the joint venture relationship involving Inotera. The amendments included a new supply agreement (the "Inotera Supply Agreement"), retroactively effective beginning on January 1, 2013, between us and Inotera under which we are obligated to purchase for an initial three-year term substantially all of Inotera's output at a purchase price based on a discount from market prices for our comparable components. The Inotera Supply Agreement contemplates annual negotiations with respect to potential successive one-year extensions and if in any year the parties do not agree to an extension, the agreement will terminate following the end of the then-existing term plus a subsequent three-year wind-down period. Our share of Inotera's capacity would decline over the three year wind-down period. Under applicable accounting guidance, the Inotera Supply Agreement is treated as containing an embedded operating lease with respect to Inotera's production assets during the initial three-year term of the lease. Effective through December 31, 2012, we had rights and obligations to purchase 50% of Inotera's wafer production capacity based on a margin-sharing formula among Nanya, Inotera and us. Under these agreements, we purchased $341 million and $742 million of DRAM products for the third quarter and first nine months of 2013, respectively, and $178 million and $476 million for the third quarter and first nine months of 2012, respectively.

Under a cost-sharing arrangement effective through December 31, 2012, we generally shared DRAM development costs with Nanya. As a result of the January 17, 2013 agreements, which were retroactively effective beginning on January 1, 2013, Nanya no longer participates in the joint development program. Pursuant to the cost-sharing arrangement, our research and development ("R&D") costs were reduced by $19 million in the first six months of 2013 and $35 million and $108 million for the third quarter and first nine months of 2012, respectively. (See "Variable Interest Entities" note.)

Other

Transform: In the second quarter of 2010, we acquired a 50% interest in Transform, a developer, manufacturer and marketer of photovoltaic technology and solar panels, from Origin. As of May 30, 2013, we and Origin each held a 50% ownership interest in Transform. As a result of the ongoing challenging global environment in the solar industry and unfavorable worldwide supply and demand conditions, in May 2012 the Board of Directors of Transform approved a liquidation plan. As a result of the liquidation plan, we recognized a charge of $69 million for the third quarter of 2012, which reduced the carrying value of our investment in Transform to zero. As of August 30, 2012, Transform's operations were substantially discontinued.

Aptina: Other equity method investments included a 30.2% equity interest in Aptina. The amount of cumulative loss we recognized from our investment in Aptina through the second quarter of 2012 reduced the carrying value of our investment balance to zero and we ceased recognizing our proportionate share of Aptina's losses.

Through May 3, 2013, we manufactured components for CMOS image sensors for Aptina under a wafer supply agreement. For the third quarter and first nine months of 2013, we recognized net sales of $61 million and $170 million, respectively, from products sold to Aptina, and cost of goods sold of $70 million and $208 million, respectively. For the third quarter and first nine months of 2012, we recognized net sales of $99 million and $292 million, respectively, from products sold to Aptina, which approximated our costs. On May 3, 2013, we assigned to LFoundry Marsica S.r.l. ("LFoundry") our supply agreement with Aptina to manufacture image sensors at our 200mm Avezzano facility. (See "Restructure and Asset Impairments - Micron Technology Italia, S.r.l." note.)

In connection with the sale of our 200mm Avezzano facility to LFoundry, on May 22, 2013, we entered into a short-term, interest-free, unsecured loan agreement with Aptina that allows Aptina to borrow up to $45 million, drawn at their option, in three equal tranches through July 2013. Principal amounts drawn are due in three equal payments from September, 2013 to January, 2014. As of May 30, 2013, other current assets included $15 million for amounts due under the short-term loan agreement. Subsequent to the third quarter of 2013, on June 3, 2013 and July 3, 2013, Aptina drew the remaining $30 million available under this loan agreement.